Area II: Risk Assessment — CPA Practice Question 71

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Audit Logic: An error is a symptom of a disease (Control Failure). If you cure the symptom (Fix the number), the disease might still cause spots elsewhere. Check elsewhere.

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C.The auditor should re-evaluate the risk assessment and consider whether the error implies pervasive control failures, potentially increasing testing in other areas.✓ Correct

The discovery of a material misstatement indicates that internal controls failed to prevent or detect it. This increases the assessed risk of material misstatement and may require the auditor to re-evaluate the audit plan and increase testing in other areas.

Common mistakes

Treating the error in isolation.

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Common mistakes

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